Julie Pombert, Senior manager, Payments Solution at National Bank, explains that people often go into debt because they don’t fully understand balanced financial management. According to her, the key to the problem is education. To ensure you’re properly equipped, we’ve put together eight pieces of advice that will help you reduce your debt.
The more you wait to pay off what you owe, the more debt you’ll contract. Since interests accumulate, the real cost of your purchases will only increase. Start paying off your debt now to avoid additional fees.
Keep an eye on your day-to-day expenses
If your lifestyle is keeping you from at least making minimum payments on your debt, you need to revisit your habits. Take some time to think about ways to reduce your day-to-day expenses. Help yourself by taking note of everything you buy within a month, then highlight everything that can be modified. On top of keeping a close watch on your daily purchases, here’s a list of things you can consider to reduce your expenses:
- Negotiate and shop around for your monthly services such as insurance, telecommunications, and car payments.
- Bring food to work rather than going out to eat.
- Choose public transportation above driving.
- Avoid unplanned expenses.
- Write down what you need before going shopping, to avoid buying anything you don’t truly need.
- Pick house brands at the grocery store.
- Try fixing broken objects instead of replacing them.
- Install intelligent thermostats to save on heating costs.
- Make the most of sales.
Avoid “buy now, pay later” deals
According to Julie Pombert, to avoid debt, it’s better to stay away from “buy now, pay later” type of deals. Often, these promotions give buyers the impression that they have more money than they really do. Consumers therefore spend more than they can afford, simply adding to their debt.
Always make minimum payment on your debt
The consequences of forgetting minimum payments on debt are much more severe than a simple increase of amounts owed. Repeatedly omitting to pay the minimum balance on your credit card can seriously harm your credit rating, meaning you might struggle to borrow again in the future.
Make big payments on debt with higher interest rates
Prioritize debt with high interest rates. This way, you’ll eliminate the debt that’s costing you more, thus reducing your global amount owed faster. Julie Pombert says that by doing this, you’ll regain your financial capacity, which means you’ll have more money to pay off the rest of your debt.
With equal interest rates, prioritize smaller debt
This one is simply a matter of motivation. With equal interest rates, you should put emphasis on your smallest debt. Seeing it disappear will encourage you to face bigger amounts. Plus, closing debt is great for your credit score.
Consider debt consolidation
A consolidation loan is granted by your financial institution to help you pay off the majority, if not the entirety, of your debt. Doing this centralizes the amount owed so as not to leave out any payments, but the main advantage is that the interest rate associated with consolidation is often lower than that of credit cards. But if you’re struggling to pay off debt, act fast; a poor credit rating will harm your chances of being approved for consolidation.
Build a personalized plan
The best way to get a personalized debt management plan is to talk about it with a National Bank professional. Our advisors can help you set realistic objectives and achieve them as quickly as possible.